CHART PATTERNS

Posted on September 1, 2010 by pb.mahendran

CHART PATTERNS
In financial market, the force of buyers and sellers creates a unique formation of
price patterns in the charts. These chart price patterns, if understand correctly gives
meaningful buy signal or sell signal. These chart patterns classified as continuous
patterns and reversal patterns. Below we present numerous Indian stock market
chart patterns.
Continuous chart patterns.
Continuous chart patterns means if you found the particular chart pattern in the chart,
the price tend to continue the trend. Common continuous chart patterns are ascending
triangle, flags, pennants, running triangle etc.
Reversal chart patterns
The reversal chart patterns means if your found the reversal chart pattern in the chart,
the price tend to reverse the trend. Common reversal chart patterns are head and shoulders, round
bottom, double top, double bottom, triple top, triple bottom etc
Ascending triangle
Ascending triangle pattern formed by sellers sell the stock at constant prices, buyers
buy the stock by higher and higher prices. Or the market sentiment turns bullish.
We may call it bullish consolidation. Generally it is considered as continuation pattern.
Below the chart image of TATA power showing the ascending triangle.

Bull Flag
Flags considered as continuation pattern. Normally it is found in bull stage and bear
stage. Sellers sell the stock at lower and lower prices; buyers buy the stock at lower
and lower prices. At the end of pattern the positive fundamental or the positive market
sentiment drive the buyers to buy the price at higher prices.
Below the image of Unitech showing the bull flag chart pattern.

Bullish Pennants
Pennants are most reliable continuation pattern. It rarely produces the trend reverse
result. These are the temporary halting area in the continuous up trend or the downtrend
of the script. It is much like the flag. Here the buyer’s trend line slopes upward towards
the seller’s trend line.
The image below is Sesagoa showing the pennant chart pattern.
Cup with handle
It is a chart pattern found in the stock market resembling the cup with handle. The bottom
formed by the negative sentiment in the market. Then the positive fundamentals of the
scripts drive the buyers to buy at the bottom. Generally it is considered as the continuation
pattern found in the bull stage and bear stage.
Below the image of Bel in Indian stock market showing cup with handle pattern.

Symmetrical triangles
Symmetrical triangle is a continuous chart pattern found in bull stage and bear stages of
the market. It is easily recognizable with clear shape. The seller sells the script at lower
and lower prices. The buyers buy the script at higher and higher prices. Due to these two
forces gives the symmetrical triangle shape to chart. If the market sentiment turns to positive the
buyers will get the edge and drive the prices to breakout the seller’s trend line.
The chart image of bel is given below with symmetrical triangle chart pattern.
Bear flags
Flags considered as continuation pattern. Normally it is found in bull stage and bear stage.
Sellers sell the stock at higher and higher prices; buyers buy the stock at higher and higher
prices. At the end of pattern the negative fundamental or the negative market sentiment
drive the seller to sell the price at lower prices
The image below is Hdil in Indian stock market showing the bear flag chart pattern.

Bearish pennants
Pennants are most reliable continuation pattern. It rarely produces the trend reverse result. These are
the temporary halting area in the continuous up trend or the downtrend of the stock. It is much like
the flag. Here the sellers’ trend line slopes downward towards the buyers’ trend line.
The image below is hdil in Indian stock market showing the bearish pennants.
Descending triangles
Descending triangle pattern formed by buyers buy the stock at constant prices, sellers
sell the stock by lower and lower prices. Or the market sentiment turns bearish. We may
call it bearish consolidation. Generally it is considered as continuation pattern. But here
below the descending triangle pattern of workard pharma is reversal pattern
Below the chart image of wockardpharma in Indian stock market showing the descending triangle
pattern.

Wedge pattern
Wedge pattern in stock prices formed by two converging trend lines both formed by the
sellers and buyers. The wedge may be rising in nature or falling in nature. It is commonly
found in the bull market and bear market. The interpretation of wedge is complicated as
the resultant price movement may go either direction. It is looks like the pennant and
resemble like the flags.
Below the chart image of VSNL showing the rising wedge pattern.

The reliability of chart patterns vary widely depends on the chart patterns. Some chart
patterns give more reliability than the others. We should not totally depend on the chart
patterns alone. If you found the chart pattern correctly then other your own indicators
give the positive signal in confirmation with the chart pattern you can take buy or sell.
The author P.B. MAHENDRAN, is one among the technical analysts, and the head of the risk
management team in traderangers.com. As a trader and technical analyst, he has wide experience
in Forex market and Indian stock market.